The Motley Fool

My top 3 UK shares to buy in August

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.
Image source: Getty Images

As the new month starts, I am looking for stocks to add to my portfolio or to buy more of.  I am impressed with each of the following UK shares so they are my top picks for August. This is why…

A FTSE 100 defence stock

The first stock I have chosen is one that I already own, BAE Systems (LSE: BA). At the end of July, this defence specialist released a very promising trading update. In fact, for the first half of 2021, underlying EBIT rose over 20% from the year before to over £1bn. The company also saw strong cash generation, with £461m of free cash flow.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Its excellent performance also enabled the company to increase shareholder returns. The interim dividend was raised by 5% to 9.9p. Furthermore, it announced a £500m share buyback programme. This suggests to me that the BAE share price may still be too cheap and has upside potential. As such, I may add more of this UK share to my portfolio.

One risk that must be considered is the fact that its net debt has risen slightly to nearly £2.8bn. Although this is currently not a problem due to the company’s strong cash generation, I still feel it is slightly high, and needs to be reduced in the near future. This may slightly limit the amount that could be returned to shareholders.

A UK share with recovery potential

Whitbread (LSE: WTB) struggled during 2020, and its share price is still 25% lower than its pre-pandemic level. It is not hard to see why. In its 2020 results report, the Premier Inn owner said it made an operating loss of £839m. Revenues were also over 70% lower than the year before at £590m.

Even so, I feel that this FTSE 100 stock can recover. From June, 98% of its hotels have reopened and it has seen “very strong forward booking trends”. This makes me think that Whitbread can start to return to normality.

I also see opportunities for the company to expand, due to a strong balance sheet that includes over £1.2bn of cash and an undrawn revolving credit facility of £950m. As such, I believe that Whitbread has the potential to further increase its market share over the next few years, especially due to the struggles faced by others in the industry.

A dividend stock

PayPoint (LSE: PAY) is the final UK share that I am tempted to buy in August. The company is mainly a bill-paying specialist that operates in the UK and Ireland. But it also has its own delivery service, the popular Collect+. Although the pandemic did lead to slightly lower profits in 2020, there were still many positives to take away. For example, the company announced that it was increasing the dividend by 6.4%, meaning that it currently yields 5.6%. This is a major sign of confidence in the future of the business.

The firm has also made some recent acquisitions — Handepay and Merchant Rentals. It is hoped that this will increase the company’s card payments capabilities and broaden the customer base.

As such, although this is a highly competitive sector, I feel that PayPoint is in a strong position. This is the reason I would buy today.

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

Stuart Blair owns shares in BAE Systems. The Motley Fool UK has recommended PayPoint. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.